MGT220H5 Chapter Notes - Chapter 5: Current Liability, Capital Structure, Disclose
Document Summary
Sfp (statement of financial position) aka balance sheet provides information: for evaluating the capital structure and for computing rates of return on invested assets, e. g. return on assets and return on equity. It is also useful for assessing an enterprise"s: [ liquidity ] (time until asset is converted to cash or liability has to be paid) [ solvency ] (ability to pay debts and related interest) [ flexibility ] (ability to respond to unexpected needs and opportunities) Return on assets (roa) : (earnings before interest and tax (ebit) / total assets) x net income. 1 many assets and liabilities are stated at historical cost. Less [ relevant ] than reporting at current fair value: subject to judgement and estimates (e. g. , a/r, inventory, patent, goodwill, does not report items that have financial value but cannot be recorded objectively (e. g. reputation, internally generated goodwill) Current assets: current assets are cash and other assets expected to be realized (i. e. , converted into cash):
